Three Scenarios for Commercial Real Estate's COVID-19 Emergence

[Michael Moran]

Hi All: 

Here's the executive summary - despite the headline, it ain't rosy. Mostly this deals with the office space, but there are multifamily residential implications. Enjoy - and I'd love to hear your feedback. Mike

Executive Summary: Commercial Real Estate (CRE), and its office subcomponent in particular, face a daunting landscape ravaged by the COVID-19 outbreak. Like all US economic sectors, CRE has taken a hit from the government-ordained lockdowns across the planet that resulted in empty offices, an abrupt halt and revenue drop for businesses of all kind, with consequent defaults on lease payments and demands for rent holidays. Some will struggle to remain solvent during this period, and smaller operators may be subject to capital calls if the lockdown period extends into the summer as valuations decline. But in all of our scenarios, the greater challenges will occur after the lockdown ends and a start-stop process or getting back to business begins. Corporations and others who rent dense commercial office space will emerge financially weaker, seeking efficiencies and armed with empirical data on how their workforce performs remotely – outside expensive leased office space. What's more, tenants and staff will rightly demand to know what steps have been taken to secure their health and well-being now that issues like personal space, infection risk and the importance of good ventilation have been highlighted by the lethal coronavirus. With valuations bound to drop from their pre-pandemic peak, those building owners, Facilities Managers and those who manage large real estate investment porfolios who take steps to address these issues now will be in better shape to survive the shakeout to come.

Full piece at https://www.cretech.com/directory/company/microshare/news/a-rosie-scenario-that-could-ruin-us-all